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How Much Does it Cost to Open a Dispensary?

By Michael Cheng

How Much Does it Cost to Open a Dispensary?

One of the most direct ways to make a living from the thriving billion-dollar legal cannabis market is through a registered medical marijuana dispensary. Statistics from ArcView Market Research suggests that sales from retail shops in the industry may reach $21.8 billion by 2020. Opening a cannabis store can be fulfilling both personally and financially. In order to secure one’s dream of opening a dispensary, it is essential first to understand the long list of requirements and costs set by state officials and regulators.

“Medical marijuana business license holders say the process to receive state and local medical marijuana certificates is grueling,” said Andrew Jolley, a Las Vegas dispensary owner.

Meeting Capital Requirements

Before diving into the complex arena of medical marijuana licensing and background checks, an applicant must first get through the most demanding aspect: capital requirements. Each state has its own minimum capital prerequisite that candidates must adhere to closely. For example, in Arizona, individuals must have $150,000 in startup capital (most states with legal marijuana laws have more or less the same standard for capitalization, e.g., $250,000 in Nevada and $150,000 in Massachusetts), or risk getting the application rejected. After meeting the capital requirements, a candidate must cover a non-refundable fee of $5,000 to kick-start the application process.

There are two salient factors to consider when meeting capital requirements for a dispensary application. When it comes to acquiring funds, the majority of applicants go through third-party lenders or hold extravagant fund raisers. This happens because mainstream financial institutions (most banks) still won’t go near the industry, forcing some business owners to store large amounts of cash in safes and locked bins. The likely rescheduling of cannabis from Schedule I to Schedule II on a federal level may address banking concerns currently plaguing the sector (should the feds push through with reclassification). Some states, like Alaska and California, have also proposed state-run banking initiatives to provide canna-businesses with better access to basic banking services.

Next, the state’s monetary requirements do not accurately depict one’s actual capitalization costs for the opening of the store. According to Green Rush Consulting, a firm that specializes in legal cannabis startups, build-out costs for a medicinal retail facility based in Arizona may reach a minimum of $250,000, which is $100,000 more than the capital perquisite established by the state.

Licensing, Registration and Renewal Fees

Dispensary costs start to vary when dealing with fees associated with the licensing process. For example, in Louisiana the licensing fee is $150, while New Jersey applicants must fork out a staggering $20,000. In some cases, parts of the fees are refundable, depending on the status or outcome of the application. It is important to consider that individuals opening a retail marijuana shop must apply for a cannabis retail license. Requirements for cultivators, product manufacturers, researchers and distributors differ greatly, and come with their own set of respective costs. For dispensary owners interested in growing on the side, one must acquire a separate cultivating or producing license to support operations. In some states, this comes with stiff renewal and maintenance fees. In Nevada, candidates must pay $3,000 to renew their growing license. On the other end of the spectrum, Connecticut charges a whopping $75,000 for renewal, on top of $25,000 for the application. Arizona-based marijuana producers are required to pay $5,000 on a yearly basis to maintain the status of their license.

Outside of licensing, prospective dispensary owners must take generic startup costs into consideration. Rent, security surveillance, POS system subscriptions, display cases, advertising, inventories and salaries are just some of the costs that should be fully accounted for during the process. Marijuana Business News provides a rough estimate for such costs, ranging between $43,900 and $135,000 for a store that is 1,000 square feet or less with two employees working inside the shop.

Other Requirements to Consider

In addition to capitalization and licensing fees, most states with legal cannabis laws require applicants to adhere to a plethora of personal guidelines, ranging from age to history of felonies and convictions. In Colorado, candidates applying for a dispensary license must be at least 21 years old at the date of filing. Furthermore, individuals working in law enforcement (sheriffs, deputy sheriffs, police and prosecuting officers) are not allowed to apply for a license from the State Licensing Authority. Applicants in Colorado may not have felony-level convictions that have not been completely discharged for five years, starting from the date of application. In almost all cases, financers of the dispensary as well as workers in the shop must have clean criminal histories. Some regions require proof of residence in the applicable state for at least two years before the date of filing.

“There are legal challenges for the pharmacists as well. Because pharmacists are required to be cleared by the Drug Enforcement Administration to dispense prescription drugs considered narcotics, that clearance would be threatened if the same pharmacist started dispensing marijuana—which remains illegal under federal law,” said Kevin Litten from NOLA.

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